India’s aviation sector may receive fresh relief as Air India, IndiGo and SpiceJet could each become eligible for credit support of up to Rs 1,500 crore under the Centre’s Emergency Credit Line Guarantee Scheme 5.0.
The support is part of a broader working capital package cleared by the Union Cabinet for sectors facing stress due to geopolitical disruptions. The package is worth Rs 2.55 trillion and is aimed at businesses hit by the ongoing West Asia conflict.
For airlines, the immediate pressure comes from three fronts: higher aviation turbine fuel prices, airspace restrictions and reduced international operations. These factors have added cost and operational strain to carriers already working in a competitive, high-cost industry.
Under ECLGS 5.0, airlines can access loans of up to Rs 1,000 crore per borrower. An additional Rs 500 crore may be available if the company brings in equivalent equity infusion. The loans may have a tenure of up to seven years, including a two-year repayment moratorium. Up to 50 percent of the interest component can also be converted into a funded interest term loan.
Department of Financial Services Secretary M Nagaraju said the proposal allows a maximum of Rs 1,500 crore for one company. For the three major airlines, this could add up to Rs 4,500 crore. He added that even if smaller airlines take Rs 50 crore or Rs 100 crore each, the aviation sector’s total support is not expected to cross Rs 5,000 crore.
The guarantee structure will depend on banks’ credit exposure, outstanding amounts and likely non-performing assets based on past experience. Lending rates for aviation are expected to be marginally lower, though final pricing will be decided by individual bank boards.
The move shows that the government is treating aviation not just as a travel business, but as a sector exposed to global shocks. Fuel prices, international routes and airspace access can change quickly when geopolitical tensions rise. For airlines, that means costs can climb even when passenger demand remains strong.
The credit line will not remove the industry’s structural challenges, but it may give carriers breathing room at a time when cash flow management has become critical. For Air India, IndiGo and SpiceJet, the scheme could help manage short-term stress while banks get a government-backed framework to lend with greater comfort.
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